tell me about starting/owning a business

[Fuller]

So tell me about buying/ starting a business. I was looking on a business for sale website and I had seen a fab shop for sale in the Wasatch front area. Its kind of getting the wheels turning.

I have no clue on what it takes to get a business started. I would like to own a fab shop and I don’t know if it would be easier to start off with one that is established, has its own specialties and customers already. or if it would be good to start of on my own and build it into something I want.

I know there is some successful business owners on this board that can give me some insight.

 

[Cody]

I think in a fabricating business, the initial cost of entrance could be high. That is, all the equipment necessary to conduct your business is probably expensive. It's also highly competitive so you don't really get to realize the benefit of that barrier to entrance. If you can buy into the equipment, and an existing customer base for a reasonable price, you could be ahead in the game. If you buy into a shop that has a terrible reputation, it could be more difficult and expensive to fix that than it would be to start on your own. Research is always the answer.

There are lots of things to consider, do you have specific questions? The first step, if you are buying or starting from scratch, is to do a ton of research and write a business plan complete with 6/12 month 1-2-3-4-5-10 year forecasting, marketing plan, etc etc. Most good business plans will usually be 40-100 pages. Once you have that, you have a road map to stick with and can go out and find $$$ from lenders. If you won't be debt financed, (pro's and cons) then the only person that really needs to understand the BP is yourself, but it's still in you absolute best interest to put a ton of work into it and try and stick with it. Lack of vision/discipline and ego are what will kill most start ups.

 

[grandmaster]

Im not a business owner, but i have some insight. What if the person who previously owned the business had disatisfied customers? That might just start you off in a bad spot, yes you may have a few customers, but thats just my opinion. If the business had a strong customer base before, you could have found yourself a little diamond.

 

[Cody]

Very rarely will a successful, running operation be sold at a discount from book value. If you know enough about business, you can make a killing by finding these companies and investing in them. however, if a business is being sold cheaper than it's book value, there is a problem. Potential machine complications, poor reputations, too much time investment to realize profits etc etc etc. If it's just a family health issue that is forcing sale, retirement, etc etc you may find a good deal.

Successful business people aren't idiots, so if they are successful and are looking to get out from it for some reason, chances are they know what it's worth. It still may be better than the alternative, but you have to do your due diligence to find out.

 

[Fuller]

Yeah I am just looking for all the info/opinions I can get. This fab shop said it was being sold because of retirement and it has been around for 14 years. Lets just use this as an example for the moment.

http://us.businessesforsale.com/us/Metal-Fabrication-Business-For-Sale-3.aspx

 

[Cody]

well, assuming all of his contracts continue, you have a $360k annual income to start with (lots of questions abuot that figure come to mind, but lets keep it simple) but keep in mind that unless you have 4 million tucked away safely inside your snare drum, you will now be paying on a HUGE note. I'm not sure what rates would be like for 4 million, but your payment on the money you would borrow would be substantially more than his, so that instantly increases your operating costs--I'd have to guess $30k per month maybe? I'm not sure the rates for those types of loans, but obviously banks aren't going to just hand out 4 million to some guy unless he has an awesome business plan, demonstrable success in the field, and some assets to put a lien on.

Regardless, you would want to find the value of the buildings and real estate, because as it is I don't think I would pay 4 million for 700,000 in liquidable assets. His margin doesn't seem too bad though, but thats just an assumption without knowing what the industry average is.

Also, do you have the knowledge and capabilities to manage that facility? I mean, we're not building lime green, washer spaced, control arms here. This is probably HD stuff for mining and other major industrial operations and if you go in, people hate and/or don't respect you and decide to leave, then you lose all the goodwill you just paid a million dollars for and have to train an entire new staff.....

I realize you're more interested in the idea of starting a business, and not serious about trying to track down 4 million to purchase this major operation....but stll

 

[Fuller]

Also, do you have the knowledge and capabilities to manage that facility? I mean, we're not building lime green, washer spaced, control arms here. This is probably HD stuff for mining and other major industrial operations and if you go in, people hate and/or don't respect you and decide to leave, then you lose all the goodwill you just paid a million dollars for and have to train an entire new staff.....

I realize you're more interested in the idea of starting a business, and not serious about trying to track down 4 million to purchase this major operation....but stll

haha yeah i totally agree. im not thinking it would be easy to run a business at all. it seams like when businesses are sold there is usually a turn over of employees. i think it would be a pain to get a 4 million dollar loan as well, that just sounds crazy.

i have just always toyed with the idea of having a fab shop, with qualified people to do the work, even if i was out there turning wrenches, or doing whatever along with the employees. not doing work on 4x4's or bikes necessarily. but more for the mining industry or heavy trucks.

 

[cannoncrawler]

i think cody is right, ego can kill alot of start ups. there is always a customer out there for you if you can humbly serve their needs and wants. egotistical business owners ave a hard time focusing on the needs of the customer.......my .02

 

[Cody]

ego can also get in the way of a business owner taking a step backwards in order to step forward, or prevent them from seeking out more qualified help.

The biggest ego related business killer are people that spend money to appear successful, and have to have the nicest of the nice etc etc. Rarely is that type of spending justifiable, or sustainable. i.e. Factory, Outer limit, etc.

the owner of the photography company I worked for through college was the worst at that. He would spend 10k on a piece of equipment that he would only use once or twice, just to say he had it and look cool in the eyes of all the 'real' photographers that thought he was a joke. Why spend 10k, to make 1k back? In his situation, he shouldn't have cared what trade photographers say because he wasn't competing with them and he could have used existing equipment just as effectively for the job in question....at any rate....

 

[Fuller]

i worked at a fab shop that needed a burn table of some sorts, every one of the fab shop employees insisted on getting a laser or water jet. when what we were building didn't require such tolerances, so we stuck with the plasma table. in a way the owner was a tightwad and a dick at that but you got to look at him on how he didn't waste money on big cars and big equipment that he didn't need. that was why he was in the position that he was in.

 

[Bart]

Yeah, there's a lot of missing information there to make an educated guess. The real estate value, equipment.... Basically you'd need to see the balance sheet and 7 years of tax returns.

 

[Milner]

ego can also get in the way of a business owner taking a step backwards in order to step forward, or prevent them from seeking out more qualified help.

The biggest ego related business killer are people that spend money to appear successful, and have to have the nicest of the nice etc etc. Rarely is that type of spending justifiable, or sustainable. i.e. Factory, Outer limit, etc.

the owner of the photography company I worked for through college was the worst at that. He would spend 10k on a piece of equipment that he would only use once or twice, just to say he had it and look cool in the eyes of all the 'real' photographers that thought he was a joke. Why spend 10k, to make 1k back? In his situation, he shouldn't have cared what trade photographers say because he wasn't competing with them and he could have used existing equipment just as effectively for the job in question....at any rate....

Oh, Cody, you bring so much joy to my day!! Thank You!!

 

[Bodine]

I have been in the "Fab shop business" for 25 yrs now,my father in law and his business partner owned a fairly successful fab shop and sold it to retire. The current owners of the fab shop are doing very well however the lessons I have learned from being around this business are that you must be prepared to eat sleep and breathe your business i have never seen a 9 to 5 business owner, you must also have significant amounts of reserves (cashflow) to survive, the fab industry is extremely competitive compared to 30 years ago. Never put all your eggs in one basket and think of it as a crawler build just when you think your about finished there are a million loose ends that need to be tied up before it will function properly.
and a degree/education will help without it you will not be as competitve.

 

[cruiseroutfit]

My 2 cents...

I wouldn't think a heavy industrial/mining fab shop could be that competitive in the SL Valley? I know there are several big ones in the Price area, naturally... they have all the mines. Sure Kenecott and dozens of others are in the valley too, but the ratio of fab shops has to be higher in the valley too. Seems one could do better moving a very professional shop to a smaller town right next door to the potential customers. Vernal/Duchesne and the oil outfits come to mind. SLC used to be a much larger market for fab & industrial, I think its tapered off proportionally to high-tech industries, I think this is further evident as places like Kenecott begin phasing out of mining and into land development.

 

[mbryson]

My 2 cents...

I wouldn't think a heavy industrial/mining fab shop could be that competitive in the SL Valley? I know there are several big ones in the Price area, naturally... they have all the mines. Sure Kenecott and dozens of others are in the valley too, but the ratio of fab shops has to be higher in the valley too. Seems one could do better moving a very professional shop to a smaller town right next door to the potential customers. Vernal/Duchesne and the oil outfits come to mind. SLC used to be a much larger market for fab & industrial, I think its tapered off proportionally to high-tech industries, I think this is further evident as places like Kenecott begin phasing out of mining and into land development.

There's some pretty good opportunities in the Uinta Basin. I haven't lived there for four years, but you could see all kinds of niche service industry opportunities if you could get out there and do some good service. That place is BOOMING. (but there's always the other part of the cycle....however, if oil stays as high as it seems it's going to, I doubt that would happen again?)

A Creasey's type food truck would do WELL, I'd assume, esp. if you could get close to the rigs/working areas.